Location was the golden rule of business before the late 1990s, when having a downtown office or a store in the mall put you where the people were. While there were always a few large phone, mail or catalog based businesses which could afford to set up headquarters in rural areas, for most people the idea of running a business without actually physically being able to shake hands with customers was not a realistic option.

But that began to change with the advent of the internet, and today running a business entirely online is no longer an incomprehensible concept. With the massive differences in operating costs between different cities, states and regions of the U.S., the question of location is back. Only this time, many entrepreneurs and home-based businesses are asking themselves if the high cost of basing out of a major metropolis still makes sense for their business.

Still, if you think you can start a web-based business anywhere and reach customers everywhere, you might need to rethink your entrepreneurial strategy, especially if your business depends on a high speed connection. While internet providers roll out 10-gigabit-per-second services, networking the world in streaming broadband, some areas remain underserved or lag behind others. Determining access, however, involves more than a seemingly simple, binary choice of a rural versus urban setting.

Broadband Availability

The U.S. Department of Commerce National Telecommunications and Information Administration (NTIA) and Economics and Statistics Administration (ESA) issued a joint study titled "Broadband Availability Beyond the Rural/Urban Divide" which highlights the challenges our nation and its entrepreneurs face in gaining easy access to the Net.

Speed Equals Function

While slower speeds provide access to the most basic internet programs, modern tools and applications are requiring higher and faster top speeds. Streaming video, chat interfaces, and cloud-based computing and updates all require quick, reliable broadband interface to complete uploads and downloads without lags, freezes, crashes or lost data. Even running an online store requires a lot of bandwidth, especially if your store becomes popular. The study considered seven speed ranges, from 3 megabits per second (mbps) to over 1 gigabit per second (gbps):

  • 3 to 5.9 mbps – the most basic speed for the simplest applications.
  • 6 mbps to 9.9 mbps.
  • 10 mbps to 24.9 mbps.
  • 25 mbps to 49.9 mbps. For single-user telecommuting purposes, 25 mbps yielded ratings of "okay." 
  • 50 mbps to 99.9 mbps. For single-user telecommuting purposes, "good" ratings came only with speeds of 50 mbps or better. Multiple users required greater speeds.
  • 100 mbps to less than 1 gbps.
  • 1 gbps or more – full-service access that does everything.

Federal Goals

In 2010, the Federal Communications Commission's "National Broadband Plan" recognized the need to improve access especially for rural and underserved areas, setting an objective to provide 100 million homes with affordable internet access at speeds of 50 mbps or better by 2015 and 100 mbps by 2020. A number of cities are announcing services of 1 gbps and more, and where one system becomes operational, competitors often follow, lowering prices and spreading access. Meanwhile, many areas wait.

Rural Versus Urban

Classifying between urban and rural, the differences are stark: 2,343 residents per urban square mile opposed with 17 per rural square mile. More than 80 percent of the population occupies urban spaces while less than 20 percent live in rural areas. Although "nearly the entire urban population (98 percent) had basic wireline broadband service," less than three-quarters of the rural population had it. Raise the speed to 50 mbps, and wireline access went to 63 percent for urbanites and a mere 23 percent for rural dwellers. Throw in wireless access figures, and rural rates plummeted to 15 percent for 10 mbps or more compared with an urban 70 percent.

Population And Access

To take an even closer look at figures, the study broke urban and rural into five population density subsets:

  • Central cities – about 33 percent of the population.

  • Suburbs – more than 40 percent of the population.

  • Small Towns – about 7 percent of the population.
  • Exurbs – less than 10 percent of the population.
  • Very Rural – less than 10 percent of the population.

Basically, internet access correlates to population densities and monetization issues. Areas with the highest population densities able to pay for service have availability to the quickest internet service.

Wireline. The detailed figures for 50-mbps wireline service illustrate access distributions perfectly:

  • Suburbs – 67 percent.
  • Central city – 62 percent.

  • Small towns – 35 percent.
  • Exurbs – 32 percent.

  • Very rural – 14 percent.

Well-to-do densely populated suburban areas have the best access, exceeding even what is available in central cities. While small towns and exurbs appear to be equal, the study indicated that exurbs actually were quite variable, dependent directly on nearness to densely populated suburbs or central cities. Those near population centers with access also often benefited.

Wireless. Both high-speed wireline and wireless access were widely available to suburbs and central cities. However, even wireless download speeds of 6 mbps in rural areas was an issue for residents: 

  • Very rural – less than 10 percent.
  • Small towns – about 18 percent.
  • Exurbs – 36 percent.

  • Central city – about 86 percent.
  • Suburbs – nearly 90 percent.

Once again, exurb accessibility relied on the populations nearby. Areas close to wealthy, densely populated suburbs or prosperous city zones often benefited through technological access.

Deciding – Urban, Suburban Or Rural

The old real estate mantra of "location, location, location" still holds true. To run a successful internet-based business, you'll need access to high-speed broadband service. While central cities are good, many times, suburbs are even better, offering both the access that you need as well as opportunity to work from your home, provided you adhere to residential zoning statutes. Even in the suburbs, however, commercial properties are available, and many suburbs appear a small metropolis in their own right, competing with their origin city's downtown and periphery areas. While a relatively rural area may provide the cheapest solution for freelancers, developers or small businesses with no need for affordable high-speed internet access, business continues to be primarily about making contacts and being where your customers are. As with everything in business, the decisions of when, where and how much all come down to numbers, in this case mbps or gbps, and how much of them your business needs.

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